The Revolution of Mobile Payments

Square revolutionized payment processing for the little guys and many in the industry have followed suit.
now wants to get in the game and reportedly will compete on price. At the core
of this smartphone-based payment revolution is the core idea of a simple,
flexible and inexpensive means for small businesses to take credit card
payments. Use the device on your hip, add a small attachment, have your
customer sign and violayou now except credit cards. Traditionally obtaining
a merchant account was the most difficult part, but somehow these players have
figured out how to mitigate the risk. As a small-businessguy whos had to
figure out a way to take credit card payments or lose a large client, the
process can be daunting without this type of streamlined process (thanks Google!).

One of the core beliefs behind this service is to make accepting the card as
painless as possible for the merchant and
the customer, keeping the process as unobtrusive as possible. Its a
model thats worked for the most coveted tech companies in the world, but could
it backfire on mobile payments? UniBul put together a great analysis that
merchants pay for as much as 41% of fraudulent
, while 59% come from the POS. Merchants taking mobile
payments are using the same old fraud prevention
techniques: check the signature (rarely) and verify adrivers license
(rarely, if ever). But as weve seen all too often, the human element in a
face-to-face transaction is dubious at best. People dont like confrontation so
they run the card and smile.

Two scenarios come to mind for mobile payments: the farmers market and the
flea market. On any givenSaturdaymy family may drop $100 total over
various booths at our local farmers market. Rarely are the transactions over
$20 and most merchants take cards. The risk for the merchant is low (although
farming isnt exactly a high-margin business). In contrast, Ive seen
transactions at flea markets for antiques go for over $5,000. The mobile
payment use is the same, but the risk is much higher. What we dont see is an
integrated, anti-fraud measure offered to merchants by the mobile payments
industry. In either scenario a stolen wallet would provide all thats
needed to commit fraud. Verifying the customers identity is cheap and easy,
especially with the tool at hand. Since the customer is signing
thereceipton the device, why not integrate out-of-wallet questions
to stump any would be scam-artists? The cost of the verification is a fraction
of the merchant transaction cost, and in essence, is an insurance policy
against a large loss. Let the merchant decide when and if they want to verify
the cardholder. Youre essentially removing the human element and taking the
confrontation out of the clerks hands, while mitigating risk.

[Contributed by Jeff Davis, President & CEO]

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